Credit Insurance Policy
In most businesses, the seller extends credit to the buyer and allows him to make payments for goods bought or services availed after some period of time. In these transactions, there is a risk of the buyer not making the payment on time. Credit Policy or Trade Credit Policy protects the companies against customer defaults.
It covers the sales of the companies to its buyers on credit against the risk of loss due to the insolvency of their customers. Commercial Business Credit Plan plays a vital role in the trading cycle company by protecting profit, cash flows, sales growth, the balance sheet, and a company’s customer base. Also known as Commercial Credit Policy, it can be of great help in the growth of sales by allowing the secure development of new buyers, new markets and the credit extended to a buyer.
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Export Credit Policy covers,
- Protracted default or delayed dayment by the debtors.
- Insolvency.
- Natural disasters like earthquake, cyclone, floods, etc.
- Import license cancellation.
- Protracted default on entities
- Any measure that is taken by the country where the buyer is located, preventing payment of a transaction.
- Military or civil war, revolution, riot or insurrection.
- Trade disputes.
- Non-acceptance of goods.
- Sales to a private individual who intends to use the goods or service for non-professional purposes.
- Sales to an associate company (Political & AOG risks can be covered).
- Sales under irrevocable and confirmed Letter of Credit.
- Loss due to foreign currency fluctuations.
- Nuclear risks.
- A war between two or more of the following countries: France, China, Russia, The United Kingdom and The United States of America.
- A war between the insured’s country and the country of the buyer.
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